How Can I Defer My Student Loan Payments?
Students who take out loans in order to pay for school are expected to pay that money back. Often, they’re expected to begin making payments as soon as they stop attending school, but some loans require students to make payments as they’re working through their classes. Students who want to buy a little time and hold off on those payments can sign up for deferment programs. If approved, their balances won’t be forgiven, but students will have a little time in which to come up with the money they’ll need to cover the debts they’ve accrued.
The deferment rate is often wrapped up in articles discussing the student loan crisis. This article from Forbes, for example, lumps deferment rates with delinquency rates, suggesting that more and more students are struggling to pay for their college experience and that a collapse is eminent. It might make for good headlines, but in reality, many students enroll in deferment programs for astonishingly good reasons that have little to do with an impending bankruptcy. Here’s how those students access the help they need.
- Are enrolled in college or career school at least part-time
- Are participating in a graduate fellowship program
- Are participating in a rehabilitation training program for disabled people
- Are unemployed or unable to find full-time work
- Are enduring a time of economic hardship
- Are serving with the Peace Corps
- Are serving in the military
- Have just completed a period of military service
Some students who fall into these categories are clearly dealing with a hardship that would make repayment difficult. But others are dealing with some kind of transformational life event that makes focusing on loans and jobs just difficult. These students might be quite capable of paying back their loans when the tough time has passed, and they’re able to really attend to their financial obligations. Deferment can allow them to do just that.
Private loans might also have deferment options, but those rules can vary significantly from bank to bank and loan to loan. Typically, however, the details regarding eligibility are found in the loan documents students sign, or the information might be available on the lending agency’s website.
In most cases, the process of deferring a loan payment begins with a talk between the student and the servicer of the loan. The student explains why making payments on time is difficult and asks about open options that might help. The loan servicer then discusses the options that are open to that student, along with the steps a student needs to take in order to get that work started.
It’s vital for students to have this conversation as soon as they possibly can. Often, these options disappear as soon as a student misses even one payment and falls behind on his/her financial obligations. Students who can’t pay really need to discuss their options and deal with enrollment before they consider missing even one payment.
Once students know about the programs that might work for them, they’re typically asked to fill out paperwork that details their financial situation. Some loan servicers put these documents online, allowing students to simply download the form they need so they can get the process rolling. Other loan servicers ask students to come into a brick-and-mortar outlet of the institution, so the student can fill out the forms in person.
Once those forms are complete and the deferment has been approved, students might not be required to make payments, but they might still get statements from the lending agency on a regular basis. Some loans continue to accrue interest during deferment, and the lender might send statements so students can keep track of their obligations.
Watching the calendar is also a vital part of the deferment process, as some programs only allow students to defer their obligations for a short period of time. When that time is up, students are expected to resume their payment programs and make good progress in beating back their loan balances. Those who don’t do so might face stiff penalty fees, and as an article in The Week makes clear, they may have no relief in sight, as these sorts of loans are typically difficult or impossible to discharge in bankruptcy.
As a result, students who default might face:
- Wage garnishment
- Tax return garnishment
- Tarnished credit scores
- Harassing calls from debt collectors
Those students who emerge from a deferment period who still can’t pay should, once again, contact their loan servicers and ask about other options. They might be able to tie their payments to their income levels, for example, or they might be able to apply for forbearance programs.
Making Smart Choices
Obviously, no student wants to take out a loan that’s much too difficult to pay. Students likely don’t want to pay the high fees associated with a loan default, and they don’t want to handle the stress of asking for a break on payments on a regular basis. Choosing the right loan at the outset might help.
Students who pick the right loan product when they enter their schools will know just how much they’re borrowing, how much the loan might cost in the years that follow, and that they’re secure in their ability to pay the balance of the loan when it’s due. If you’d like to be a smart shopper like this, we’d like to help.